tax deferral

Tax Deferral

A situation in which one is not required to pay taxes one would otherwise owe until some date in the future. Most of the time, tax deferral refers to contributions to an IRA or a 401(k) or other retirement instrument. Under many structures, one is able to make contributions from one's pre-tax income; this means that taxation is deferred until withdrawals are made, generally after retirement.

tax deferral

The delay of a tax liability until a future date. For example, an IRA may result in a tax deferral on the amount contributed to the IRA and on any income earned on funds in the IRA until withdrawals are made. At the corporate level, accelerated depreciation of assets results in a delay in tax liabilities. Tax deferral, which is legal, means a postponement, not an elimination, of a tax liability.

According to Jefferson National's The Power of Tax Deferral survey, 96 percent of financial advisors say tax deferral is important to confront today's triple threat, and 86 percent of advisors expect that tax deferral will be more important in the future.

Through the Seniors Property Tax Deferral Program, homeowners 65 and older can defer all or part of their residential property taxes through a low-interest home equity loan with the Alberta government.

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